All you need to know about party data management.
What exactly is party data? I get asked that question surprisingly often and have found that many - even in the Master Data Management space - are not completely familiar with the term "party". I am of course not referring to the good times had with friends but rather the way in which we can describe the master data domain that predominantly looks after individuals and organisations. In this blog post, I will try to clarify exactly what party data is and why it's important to master it.
What is party data?
First, the word party is derived from business and legal relationships and typically refers to an individual or organisation. Traditionally, we talk about first, second and third party data.
First party data
A first party is typically you. You often find this term in a contract where you sign as the first party. Naturally, first party data will be your data. Your data might very well be shared with someone else, such as a second or third party, and consumers are not always fully aware of the implications of this, which is why new, strict laws about consenting to sharing your data, including GDPR, are on the rise.
Second party data
Second party data is essentially another company’s first-party data that is collected and sold by that brand. In other words: someone else's first party data. While third party data is data collected by an organisation that has no direct relationship with you, for instance data brokers. Third party data providers offer party data that might help improve a business, such as prospect lists to retailers, or D-U-N-S information to manufacturers and financial institutions.
Third party data
A third party may also refer to a party that might not play a direct role in a transaction but can influence it. Examples include attorneys, legal representatives and financial advisors. When managing customer master data, the relationships between parties matter because they can have specific roles. A single party might even have many roles. For example, the party, “John,” who in this case is a bank customer, may have a party-to-party relationship of “spouse” with “Emily.” But “Emily” might also have the relationship role of “power of attorney” for a bank account so that she can manage "John"’s finances on his behalf.
Emily : party type = “individual”
John : party type = “individual”
Emily -> “relationship of spouse” -> John
John -> “relationship of husband” -> Emily
Mortgage Contract -> “role relationship = owner” -> John
Mortgage Contract -> “role relationship = power of attorney” -> Emily
In this instance, you can see that John is clearly a customer. He owns the mortgage contract. Emily is not a customer. But she plays an important role that is relevant to understand by, for example, a customer services manager. It is often therefore important that non-customer parties, such as Emily, are recorded in any customer master data management solution that is supporting CRM operations.
Involved party (IP) data
Another term of common usage is that of “involved party” or IP. An IP refers to any party that has an interest in a relationship, business transaction, litigation, etc. Like any other party, IPs can be organisations or individuals.
Other types of party data
While all this might sound like financial services terminology, these types of terms are used in many different industries. Consider, for example, freight and logistics. To move a package from A to B, many parties are involved. The one who is responsible for the service (supply chain) is often called the lead logistics provider – or 4th Party Logistic provider (4PL). This industry uses a large number of intermediaries (parties) to successfully accomplish their mission. As you would imagine, there are many complex relationships that exist between these intermediaries in order to manage a supply chain. For industries such as logistics, with much complex customer and partner information, it is particularly valuable to rationalise business relationships.
Party data as a competitive advantage
The ability to organise party information can in fact be a key competitive factor, when parties are grouped together. For example, identifying individuals who might belong to the same household might provide opportunities to upsell or reduce risk by identifying undesirable relationships.
Hierarchies are especially useful to understand corporate relationships. Legal hierarchies help to improve the quality of data that characterises a business relationship. Hierarchies themselves might contain relationships to other parties, such as how a shareholder (party individual or party organisation) is related to a legal entity.
Some companies have cyclic customer relationships, which makes it even more challenging to manage customer master data management. In the chemical industry for example, many companies have the same suppliers as customers. The ability of a master data management solution to recognise the multiple role-relationships that exist between suppliers and customers can be of high importance to business performance measurement – for example, helping to answer questions such as, “Do I sell to this company more than they sell to me?”
Party data (management) in a nutshell
The word party helps to explain relationships that are important to a record. Building a reliable and insightful understanding into the relationships across all types of parties can be a competitive advantage.